Worried a car accident lawsuit could reach what you own in New York: what protects you, and why moving property backfires

Attorney Answer

Your liability insurance is the main protection, and the law already shields part of what you own. What does not work is moving property out of your name once a claim exists: New York lets a court undo that kind of transfer, and it can make your position worse. If no accident has happened yet, protection is planning — higher liability limits and an umbrella policy. If one has, it is your insurer's defense, the exemptions the law gives everyone with a judgment against them, and your own lawyer if the claim may exceed your policy.

Your insurer defends you, and pays up to your limits. A liability insurer's duty to defend is broader than its duty to pay: it must defend a suit whose allegations fall within the policy, even if it may later owe nothing, as the Court of Appeals held in Automobile Ins. Co. of Hartford v. Cook, 7 N.Y.3d 131 (2006). What it pays is capped by your limits. New York's minimums are $25,000 for bodily injury to one person and $50,000 for bodily injury to two or more people in one accident, with higher limits where death results, and $10,000 for property damage (Vehicle and Traffic Law § 311(4)(a)). If a claim is worth more than your policy, the difference is yours.

When the claim may exceed your limits. An insurer that refuses a settlement offer within your limits is liable for the excess only if it acted in bad faith, which requires a gross disregard of your interests — a deliberate or reckless failure to weigh them equally with its own. Ordinary carelessness is not enough; the insured lost on that point in Pavia v. State Farm Mut. Auto. Ins. Co., 82 N.Y.2d 445 (1993). That is why a person facing a claim above the limits should have a lawyer of their own, not only the one the insurer provides.

Why moving property now backfires. New York's voidable-transactions law treats an injured person as your creditor before any judgment. Debtor and Creditor Law § 270:

(c) "Claim", except as used in "claim for relief", means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.

(d) "Creditor" means a person that has a claim.

And § 273(a) reaches a transfer made before or after the claim arose:

(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(1) with actual intent to hinder, delay or defraud any creditor of the debtor;

In deciding whether that intent existed, a court may look at whether, among other things, “before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit” (§ 273(b)(4)). A transfer for less than it was worth, made while you were insolvent or leaving you insolvent, can be undone on that ground alone (§ 274(a)). Under § 276(a), the creditor can have the transfer undone to the extent needed to pay the claim, and can ask the court to stop further transfers of the property.

What the law already protects. A judgment does not reach everything. CPLR 5205 exempts specified personal property, and CPLR 5206(a) exempts a capped amount of home equity, set by county. Exempt benefits paid into a bank account by direct deposit are protected too. The amounts change over time, so a lawyer should apply them to what you own.

A judgment you do not pay. Vehicle and Traffic Law § 332(a):

(a) The commissioner shall also suspend the operator's or chauffeur's license and any and all of the registration certificates and registration plates issued to any person upon receiving authenticated report as hereinafter provided that such person has failed for a period of fifteen days to satisfy any judgment in amounts and upon a cause of action as hereinafter stated.

Under § 332(d), a driver whose insurance was in force and paid the judgment to the extent the law requires is relieved of that suspension.

What you can do

1. If no accident has happened, review your liability limits with your insurance agent, and ask about an umbrella policy.

2. If there has been an accident, a claim or a lawsuit, send every letter and court paper to your insurer at once, and keep copies. Your policy requires prompt notice.

3. Do not transfer, retitle, give away or sell property for less than it is worth while a claim is possible. Talk to a lawyer before any significant transfer.

4. If the claim may exceed your limits, or your insurer says it may not cover the claim, hire a lawyer of your own.

⏱ Time limits apply. If you have been sued, the court papers carry a deadline to respond, and missing it can lead to a judgment by default. An injured person generally has three years from the accident to sue under CPLR 214(5).

A New York attorney can look at the specifics quickly, and most offer a short first conversation at no cost. A few minutes on your actual facts is worth more than any general guidance, this page included.